Chapter Four
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Market/Submarket Analysis
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Chapter 4 - Market and Submarket Analysis
PPT 4-1
Dimensions of a Market Analysis
• Emerging submarkets
• Actual and potential market and submarket size
• Market and submarket growth
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• Market and submarket profitability
• Cost structure
• Distribution systems
• Trends and developments
• Key success factors
Chapter 4 - Market and Submarket Analysis
PPT 4-2
Emerging Submarkets
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Relevance!
Chapter 4 - Market and Submarket Analysis
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Marketing the Wrong Product
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SUV
Chapter 4 - Market and Submarket Analysis
Hybrid
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“Having great products is not enough.
You need to make what customers want to buy.”
- David Aaker
Chapter 4 - Market and Submarket Analysis
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Customer Decision Process
Brand Relevance
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Select Product
Category or
Subcategory
 SUV
Determine
Brands to
Consider
 Lexus
Brand Preference
Select
Brand
to Buy
 Mercedes
 BMW
 Mercedes
Chapter 4 - Market and Submarket Analysis
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Questions to Help Structure a
Market Analysis
• Submarkets
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Are augmented products, emerging niches, trend toward
systems, new applications, repositioned product classes,
customer trends, or new technologies creating
worthwhile submarkets? How should they be defined?
• Size and Growth
Potentially important submarkets? Size and growth
characteristics? Submarkets declining? How fast?
Driving forces behind the trends?
Chapter 4 - Market and Submarket Analysis
Figure 4.1
PPT 4-7
Questions to Help Structure a
Market Analysis
• Profitability
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How intense is the competition among existing firms?
Threats from potential entrants and substitute products?
Bargaining power of suppliers and customers?
Attractive/profitable markets or submarkets?
• Cost Structure
Major cost and value-added components for various
types of competitors?
Chapter 4 - Market and Submarket Analysis
Figure 4.1
PPT 4-8
Questions to Help Structure a
Market Analysis
• Distribution Systems
Alternative channels of distribution? How are they
changing?
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• Market Trends
• Key Success Factors
Key success factors, assets, and competencies to
compete successfully? Can assets and competencies of
competitors be neutralized?
Chapter 4 - Market and Submarket Analysis
Figure 4.1
PPT 4-9
Detecting Maturity and Decline
• Price pressure caused by overcapacity and the lack
of product differentiation
• Buyer sophistication and knowledge
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• Substitute products or technologies
• Saturation
• No growth sources
• Customer disinterest
Chapter 4 - Market and Submarket Analysis
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Porter’s Five-Factor Model of
Market Profitability
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Competition
among
Existing firms
Threat of
Potential
Entrants
Bargaining
Power of
Suppliers
Chapter 4 - Market and Submarket Analysis Figure 4.3
Industry
Profitability
Threat of
Substitute
Products
Bargaining
Power of
Customers
Source: Adapted from Michael E. Porter, “Industry Structure and Competitive
PPT
Strategy: Keys to Profitability” Financial Analysis Journal,July-August 1980,p.33.
4-11
Risks of
High-Growth
Market
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Competitive Risk
Firm Limitations
• Overcrowding
• Resource constraints
• Superior competitive entry
• Distribution unavailable
Market Changes
• Changing KSFs
• New technology
• Disappointing growth
• Price instability
Chapter 4 - Market and Submarket Analysis
Figure 4.5
PPT 4-12
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Key Learnings
•
The emergence of submarkets can signal a relevance problem.
•
Market analysis should assess the attractiveness of a market, as well as its
structure and dynamics.
•
A usage gap can cause the market size to be understated.
•
Market growth can be forecast by looking at driving forces, leading
indicators, and analogous industries.
•
Market profitability will depend on five factors – existing competitors,
supplier power, customer power, substitute products, and potential
entrants.
•
Cost structure can be analyzed by looking at the value added at each
production stage.
Chapter 4 - Market and Submarket Analysis
PPT 4-13
© 2014 John Wiley & Sons
Key Learnings
•
Distribution channels and trends will often affect who wins.
•
Market trends will affect both the profitability of strategies and key success
factors.
•
Key success factors are the skills and competencies needed to compete in
a market.
•
Growth market challenges involve the threat of competitors, market
changes, and firm limitations.
Chapter 4 - Market and Submarket Analysis
PPT 4-14
© 2014 John Wiley & Sons
Ancillary Slides
Chapter 4 - Market and Submarket Analysis
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“As the economy, led by the automobile industry,
rose to a new high level in the twenties, a complex of
new elements came into existence to transform the
market: installment selling, the used-car trade-in, the
closed body, and the annual model. (I would add
improved roads if I were to take into account the
environment of the automobile.)”
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- Alfred P. Sloan, Jr.,
General Motors
Chapter 4 - Market and Submarket Analysis
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“Vision is the art of seeing things
invisible.”
- Jonathan Swift
Chapter 4 - Market and Submarket Analysis
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“To be prepared is half the victory.”
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- Miguel Cervantes
Chapter 4 - Market and Submarket Analysis
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“Small opportunities are often the
beginning of great enterprises.”
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- Demosthenes
Chapter 4 - Market and Submarket Analysis
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“The quality of decision is like the welltimed swoop of a falcon that enables it
to strike and destroy its victim.”
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- Sun Tzu
Chapter 4 - Market and Submarket Analysis
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“Most of the most important
experiences that truly educate cannot
be arranged ahead of time with any
precision.”
© 2014 John Wiley & Sons
- Harold Taylor
Chapter 4 - Market and Submarket Analysis
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